Senate Democrats unveil 5-part tax plan to solve WA’s multi-billion-dollar budget probleM
By Simone Carter for the Olympian • March 20, 2025
As Washington faces a budget gap somewhere in the multi-billions, state lawmakers have brainstormed ways to close it. Two days after receiving a less-than-sunny revenue forecast, Senate Democrats revealed a five-part tax proposal — one that supporters say would ask ultra-wealthy residents to pay their fair share.
Released Thursday morning, the new revenue plan for the next biennium’s operating budget comes as Democratic lawmakers have warned what it would take to balance the budget through cuts only. House Democrats recently launched a website detailing the consequences of a “no-revenue” budget, including major reductions in health care, human services and early-learning programs. It’s no surprise that Republicans would go about mending the state’s financial woes differently. The minority party insists that the budget can be balanced without making “drastic cuts” — and also without tax increases. The Senate Republicans’ budget proposal would skip funding about $4 billion in state-worker pay raises negotiated by former Gov. Jay Inslee, opting to give out $5,000 bonuses instead. State Sen. Noel Frame, a Seattle Democrat and vice chair of the Senate Ways and Means Committee, said in a March 20 news release that lawmakers have worked for months to scour the budget for savings and efficiencies.
“Rather than balance our budget entirely through devastating cuts or doubling-down on our regressive tax code on the backs of working families,” Frame said, “we’re asking the wealthiest among us to finally do their part and pay what they owe so that we can fund great public schools, health care, public safety, and the services that our most vulnerable residents are counting on.”
The five-pronged proposal would contain: Financial intangibles tax Also referred to as a wealth tax, this would amount to a $10 tax on every $1,000 of assessed value of some financial assets — including mutual funds, bonds, stocks and exchange-traded funds — held by people with more than $50 million in such assets. It would apply to approximately 4,300 people. This tax would generate about $4 billion annually beginning in fiscal year 2027, benefiting the state’s public schools. Nixing the employer-payroll taxes cap The second prong is a tax of 5% on big employers “on the amount of payroll expenses above the Social Security threshold — currently $176,100 per year.” It only applies to companies with at least $7 million in payroll expenses, or nearly 5,300 establishments. The idea aligns with Seattle’s so-called JumpStart tax and features a credit for companies that are paying that tax already. Some $2.3 billion would be generated annually after full implementation, helping areas such as health care, public schools, public safety and assistance for the elderly and people with developmental disabilities.
Letting property tax grow by inflation and population This would increase the property tax growth limit for Washington’s common schools levy and for counties and cities, in addition to special-purpose districts. The current cap is 1% per year, but under the proposal, that would get lifted to the total rate of population growth plus inflation. Lawmakers say this would let the growth limit mirror the real cost of public safety and other services, rather than tethering it to an arbitrary number. In addition, the proposal would feature certain exemptions. Washington’s property tax is devoted to public schools, with some $779 million more in funding expected over the whole four-year budget cycle. Increased funding in counties and cities, meanwhile, would pay for criminal justice, public safety and community protection. Repealing obsolete, inefficient tax preferences This next idea would repeal 20 tax exemptions where the public policy objective wasn’t met or it’s unclear whether it was met — or the exemption was deemed by nonpartisan auditors as being legally obsolete, including for gold bullion, in-state hauling and prescription-drug wholesalers, among others.
The payoff? More than $1 billion over the four-year budget cycle for public schools, social services and health care. Slashing the regressive sales tax The cost of living continues to climb. But Democrats say that the state’s regressive tax code heaps added strife onto families already straining to make ends meet. This idea would ease the disproportionate effect on middle- and low-income households with a 0.5-point sales-tax decrease — 6% instead of 6.5% — a revenue drop of about $1.3 billion annually. What Democratic lawmakers say Senate Majority Leader Jamie Pedersen, a Seattle Democrat, said constituents have been clear that the wealthiest residents should shoulder more of the responsibility of paying for essential services and public schools. People, regardless of political affiliation, are frustrated with a tax system they view as rigged against the middle and working classes. “This transformative proposal will rebalance our tax code and provide ample funding for public schools, public safety, and the needs of the people of our state,” Pedersen said in a news release.
Senate Ways and Means Committee Chair June Robinson said that the proposal for the operating budget features billions of dollars in cuts. But a cuts-alone budget would also wreak havoc on communities statewide. “We need a balanced approach — one that includes both responsible, targeted reductions and new revenue paid by some of the wealthiest people and corporations in the world,” the Everett Democrat said in the release. “This proposal is a key part of that.” Frame said the “antiquated,” nearly century-old tax code largely relies on flat taxes that don’t distinguish between working people and the uber-rich. In other words, she said, it’s “deeply unfair.” The proposed reforms would help fund health care, schools, services and infrastructure, she continued. Frame said that lawmakers have applied feedback from fellow legislators, tax experts, the business community and others. “We’re confident every single one of these proposals are ready for implementation, can withstand legal challenges, and will raise the revenue from the wealthiest few that we need to fund the schools and services Washingtonians not only need, but deserve,” she continued.
Treasure Mackley, executive director of Invest in Washington Now, views the revenue proposal as a win. She told McClatchy that for far too long, the state has had an upside-down tax code. She’s excited to see progressive revenue proposals that ask the wealthy to pay their fair share. Mackley said that when voters defeated a number of ballot initiatives in November, including Initiative 2109, which would have repealed the capital-gains tax, they sent a message: “Hey, we do want you to fund education and child care. These things matter,” she said. “And we want you to ask the wealthy to do their part.” Senate Republicans respond The Washington Research Council estimates that the Senate Democrats’ proposals would equate to $21 billion in new revenue over a four-year span. It would be offset, however, by the reduction in sales taxes, bringing the net tax increase to $17 billion over four years. The estimated maintenance-level deficit over that time frame is $8.7 billion, the council says. State Sen. Gildon, the Senate Republican budget leader, said in a statement that “this is a new kind of March madness.” He argued that while his Democratic counterparts say the wealthiest Washingtonians should pay more, the “property-tax increase they want is regressive.”
“It would fall directly on the backs of families who are far from wealthy and also become a pass-through cost to renters across our state,” the Puyallup Republican said. “To me that’s talking out of both sides of your mouth.” State Sen. Nikki Torres, assistant Senate Republican budget leader, seemed incredulous in an emailed statement. “How could our Democratic colleagues ‘scrub the budget for savings,’ as they claimed today, and still want $20 billion in new and higher taxes?” the Pasco Republican said. Torres said she’s “very troubled” by the proposed property tax-related increase. The yearly growth rate would likely exceed the 3% proposed by Democrats in the past two years and compound over time, she added. She said that Republicans floated the idea of a temporary sales-tax cut of 1% when the state enjoyed a surplus in 2022 — but that Democrats didn’t act. “Now they’re proposing to cut the sales tax half a percentage point, but only along with the largest set of tax increases in state history — and the sales-tax cut wouldn’t take effect until 2027 anyway,” Torres said. “It’s hard to see that as a serious attempt to help the struggling households across our state.”
House and Senate Democrats are expected to release their full operating-budget proposals early next week. Before the session ends April 27, both chambers must agree on a budget and revenue plan, to be signed by Gov. Bob Ferguson.
